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Get ready for a long read. Last week, the Obama Administration announced a five-year program to test alternative payment models for Medicare Part B drugs. The program will try new methods relating to drug prices, patient outcomes and physician payments starting next year.

Currently, Medicare pays doctors an extra 6% of the price of the drug they administer, which gives providers a bigger payment when they choose medications that cost more. This can lead to prescribing more expensive drugs, which sometimes differ from cheaper drugs only in price.

What is a Part B Drug?
Not all prescriptions are filed under Part D. Drugs that beneficiaries don’t take on their own, like those that are administered by injection or infusion at a doctor’s office, fall under Part B.


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What will the program do?
There will be two phases. The first phase, which would go into effect later this year, would decrease Medicare’s additional payment from 6% to 2.5%, and use a flat payment of $16.80 per drug per day. The Centers for Medicare and Medicaid Innovation are looking to see how these changes affect the way doctors prescribe medications.

The next phase, which could begin as soon as early next year, will include a series of value-based purchasing options, based on price and effectiveness of drugs. Each strategy will be tested in a different geographic area:

  • Decreasing or ending cost-sharing for Part B drugs, so that beneficiaries may access effective drugs more easily
  • Creating tools for providers to choose drugs with evidence of their effectiveness and other information
  • Options for different payments based on the effectiveness of a drug
  • Using a benchmark, or standard rate or payment, for similar drugs
  • Connecting patient outcomes with drug prices by partnering with drug companies

What are people saying?
The Obama Administration, Centers for Medicare and Medicaid Services and advocates say that the decision for which drug to prescribe should be made with factors such as effectiveness, quality, the patient’s need, and price.

Those against the payment models call it an “absurd experiment,” and believe that doctors know what’s best for the patient, and should be free to prescribe without government oversight. Some doctors in certain specialties are concerned about losing major percentages of their profits.

Comments can be submitted on the program until May 9th.

Will any group be negatively affected?
Some specialists will be more impacted than others by the program. Oncologists, Ophthalmologists, and Rheumatologists, who make a significant profit with Medicare’s drug payments, would see the biggest change in money earned. Primary Care and Family Practice Physicians would see a 44% rise in Part B drug payments, as they typically prescribe and administer cheaper drugs than other specialists.

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To read more about the Part B payment program, see this NPR article.

The full proposition of the program is available online at the Federal Register.

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